Finance Public and Private
The Past Quarter
glancing over the developments of the first quarter the year, it is impossible not to be struck with the otter in which the Stock Markets have withstood all favourable influences. To mention only two of the tors which have operated, I venture to say that if at beginning. Of the year the Stock Exchange had been that hopes of an early, reduction in the Bank tc were to be doomed- to disappointment, and that tuts in China would develop so seriously as to necessi- c the despatch of a British expedition to safeguard t only our commercial interests but the lives of our ow-countrymen, there would have been a general tectation of a downward tendency in public securities. far, however, from such having been the case, an urination of prices shows that on the whole the ten- cy has been upwards, and the representative list ted by the Banker's Magazine shows that for the e months there has been an appreciation of over 1,000,000.
Two MAIN FACTORS.
have only cited two main factors, namely, the reten- i of the 5 per cent. Bank Rate and developments China, which might have been expected to exert a ressing effect upon securities, but others might easily enumerated. For example, the flotation of new issues capital has been on a sufficiently extensive scale to mete seriously with existing securities, while the uence of comparatively dear money has been empha- 1 by an outflow of gold at a moment when it was hoped movement would be in the other direction. More- l., it is in the March quarter that the Stock Markets adversely affected by the ingathering of the Revenue. t neither that fact nor the prospect of a large deficit the end of the year, to say nothing of uncertainties It regard to the forthcoming Budget, have had any terial effect upon securities, whatever may have their negative influence in the sense of preventing appreciation in. values from having been greater it has been.
BAD REPORTS.
loreover, to these influences one further factor might added, namely, the disastrous results disclosed in the mal reports of English railways and, indeed, of some er of the big industrial- concerns. And yet the fact alas that in high-class investment securities, Indus- Is, Home Railways am:Lin most of the Speculative rkets, prices show a slight improvement when corn, with those which were quoted at the end of last ember. Two practical considerations, therefore, Id seem to arise. The first is to what the strength securities must be attributed, and the second is what conditions of the past quarter suggest for the ensuing e months.
MARICET TECHNICAL POSITION.
s regards the first of these points, I should be inclined tuphasize, in the first place, one or two great change's eh have taken place in market conditions since the r. One of these is, I think, that while during the r great wealth was created by manufacturing activities, applied, of course, so much to trade as to War Materials, War profits, by reason of the subsequent depression trade, have perforce found their way into public- rities. In the second place, as against this steady am of genuine investment buying there has not had. be set the technical weakness which in pre-War days se from excessive' speculative activities on the contango em. The volume of such transactions is now in- tely smaller than in the pre-War days, and, as a Conse- nee, markets are less sensitive to every passing uenee of an adverse character. '
TILE BUDGET.-
far as direct factors are concerned it 1 •Iti,o,s though course of markets in the immediate ture might largely be diiiiiiiulfed-bY the OTIFE-BlicTiet and the developments in China; With regard to the former, it is usually safe to predict that in the absence of any sensational addition to the burden of taxation, the delivery of the Budget constitutes a helpful influence simply because previous ' uncertainties tut removed. Nevertheless, if I were taking a long view instead of merely offering some comments upon prospects for the next few months, I should say. unhesitatingly that in the absence of any definite indication of a reduction in the National Expenditure, the Budget, or rather the National Finances, must be counted amongst the factors which sooner or later will exercise a depressing influence upon high-class investment securities. Reverting, however, to the immediate outlook, I am not disposed to attach very great importance to the next Budget as a factor in the 'markets during the next few months, though, of course, I except any effect which might be produced upon any individual security by a tax particularly and peculiarly affecting it. On the other hand, as regards developments in China, or rather it might be said as regards develop- ments in Bolshevik activities generally, I am inclined to think that we may. have reached the point when either these activities will decline, with a beneficial effect upon public confidence, and, therefore, upon both business and securities, or else that their evil influence will be more clearly recognized as something not to be ignored in taking stock of the future.
SOME FAVOURABLE POINTS.
As already noted, we have during the' past quarter had many • unfavourable reports of industrial companies reflecting the effects of the coal stoppage. I think, however, that during the coming quarter industrial shares may benefit by the fact that most of these unpleasant reports have now been issued, while we should begin to feel the effect of the slight improvement which has taken place in some of our key industries, including ship- building and iron and steel. Then again it must be remembered that we shall shortly be making comparisons, both as. regards railway traffics and our foreign trade returns, with the abnormal period of depression last year resulting from the coal stoppage. While, therefore, these figures ought, of course, more properly to be compared with -those of two years ago, the mere fact that the com- parison will be with the previous year, and that big gains should be shown, may have a stimulating effect upon the market for English rails and certain home industrials.
ARTHUR W. KIDDY.
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